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Is there a risk for me? or Ethical Dilemma?

I'm the assistant controller of a firm. A new controller has been hired and his wife is our new CPA. Is there an ethical issue here? What risk do I face? Any advice? Help???

Answers

Anonymous

(Accountant)
| Aug 3, 2015

It is hard to answer your question without knowing other relevant information. In my point of view you have mentioned just one position described differently in one long distance process*. But without knowing all the needed information it depends just about responsibilities and results of their work. If you have quite good governance environment settled out within organization it has no impact for the company at all. Ethical dilemma would be when one is directly subordinate to other and not just by performance but also by governance and control aspect of work.
By the way why do you think you should have faced a risk in such situation?

Anonymous

(Chief Financial Officer)
| Aug 3, 2015

Not your issue. It should be an issue for both the Controller and your CPA under whichever Code of Ethics they ascribe to.

It may not be listed as "unethical," but it is not normally a good idea to have related parties in those positions. Does someone else have oversight over what the CPA is billing your company and the work she is being contracted to do? The issue is the CFO's issue, but you won't be far from it so it won't be easy to not think about.

You don't mention what services the CPA performs but, as the controller's wife, she is not independent and so cannot provide audit and review services. If she is only doing tax work, and her services (terms of engagement, work product, fees) are being reviewed by someone senior to the controller, then there is unlikely to be a risk or an ethical issue.

Definitely not good - ask your boss/new Controller if it was discussed during the hiring process. Find out what your CFO or CEO think of the situation. Is the CPA a sole practitioner or part of a firm with other principals that would have an opinion? CEO or owner should be concerned about conflict in many ways!

Definitely not a good idea to have the controller related to the CPA, regardless of the services provided by the CPA. Instantly, there is a related party footnote in the audited Financials which raises many question even though nothing improper is being done. I would hope that, both the Controller and his CPA wife would find that they do not want the potential of this ethical shadow covering their professional judgement.
I would raise the question to your new controller in a professiinal, non-judgemental way, to protect his reputation. He should welcome this independent view designed to protect him. If his reaction is defensive and non-professional, then talk to the CEO if your have credibility in the organization.

If you don't think the controller or CEO will receive your judgement in a constructive way, then don't confront the issue. It is not your call and they could see it as trying to undercut your new boss or wanting his job.

I agree with Stephen that the services rendered by the CPA are very relevant. Clearly any assurance services would be an ethical conflict. Any system of internal control that presumes the segregation of their duties would also be severely compromised. However, if both positions are individually accountable to the CFO and sufficient controls exist that would mitigate any potential collusion, the relationship (although not ideal) could be acceptable.

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